Virtual Worlds, Real Potential – Imaginary Numbers?

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On Tuesday night I attended the The Music: Ally Debate Virtual Worlds, Real Potential event on the commercial potential of virtual worlds. Keynote talk was from Justin Bovington, CEO of Rivers Run Red, and panelists were:

Barney Wragg, global head of digital, EMI Music

Daniel Heaf, interactive editor, BBC Radio 1

Roo Reynolds, metaverse evangelist, IBM Labs

Paul Van Gerven, founder, PVG Virtual Concerts

Christian Batist, regional director Europe, Sulake / Habbo Hote

The event was chaired by Toby Lewis, Editorial Director, Music Ally.

Justin gave a talk and demonstration of some of his work on Second Life. I had seen some of this before (see the TechCrunch UK article here for example) but some new factoids emerged.

- There are now some 1.7 million 2nd Life users (though I don’t think I’ve ever seen more than about 10,000 online at a time – it wasn’t clear if this was real users or Avatars)

- Anshe Chung (the first 2nd Life real life (R/L) millionairess) uses 50 people in China to build habitats (is this sweatshop software?), and over 10,000 people are making real money trading on the site.

- He estimates c 900,000 of the 2nd Life users are pure mass market, with very different expectations from the early adopters

It was also interesting to hear some of Justin’s views on future trends, most high impact I think were that:

- Second Life is becoming a media channel – from launch the 2nd Life TV station VirtualLifeTV has had c 475,000 people view it. YouTube videos and music are heavily streamed into 2nd Life.

- The backlash against Big Brands advertising is real, but every time there is anti-brand buzz, more people visit and the sales go up. Brands are also learning the lessons that they have to contribute to 2nd Life to really resonate, since behind every avatar is a person – and these people are some of the most net literate out there and are highly vocal, for good and ill.

- Tax (and contract) implications are still a muddle, he does not see that area being sorted out within 3 years at earliest.

It’s also worth noting some of Christian Batist’s thoughts about Habbo Hotel and Virtual Worlds in general. Habbo is a much less “free form” model, the world is pre-constructed for the Habbos (avatars) to inhabit and they mainly get to furnish their room in the Habbo Hotel as their form of creative expression (like a 3D Profile really). It is significantly bigger than Second Life, with some 7m users, and is mainly aimed at teens. Interesting commonalities between Habbo and 2nd Life are:

- They both find the “newbies” dress up their avatars initially but return closer to the “real person” over time

- Both have business models largely based on a tradeable currency – Linden dollars and Habbo credits – which allow 2nd Life and Habbo to monetize the businesses. Habbo rents rooms and sells hotel furniture, Linden rents land and sells virtual goodies.

- High levels of female participation – near 50% – which is unusual in standard gaming.

- Both have problems if too many people are in a small space, so need to control access at times.

I thought Toby Lewis compered the panel discussion rather well, asking some very sharp questions rather than letting the panel members give prepared talks. I loved his point that these were all just glorified chat rooms – the sound of heresy being spoken ;)

This approach did lead to some very instructive conversations, some I have noted here.

Barney Wragg noted that from an EMI point of view, although much of the material in 2nd life was copied (which was morally and ethically unsound of course – no word of the EMI / Yahoo trial announced that day), the major labels were still looking at how best to use these media as there are interplays between the commercial and promotional value, and this differs by label and artist type. There seems to be considerable latitude for interpretation (aka confusion) as to whether 2nd Life is a common carrier or a content hoster, and if its is covered by WIPO “safe harbour” rules – and if so, under which country’s rules.

Roo Reynolds was put on the spot about the downsides of virtual worlds. Issues with 2nd Life are that it takes time to master, and it is hard to find people in such a vast place until you are plugged into the social network. (Christian Batist noted his real life 2nd Life experience when a huge apartment block was erected between his carefully chosen and constructed habitat and his view of the ocean.). Issues with simpler worlds like Habbo are stickiness – what do you do when you have mastered it?

Hans Timmerman noted that to do a virtual concert performance in 2nd Life it took a similar crew to that in a real concert – even down to the bar staff. He also reflected that it was now much harder for independent music to make an early splash, given the hundreds of thousands of pounds big brands were spending on getting themselves known ( One event mentioned apparently cost c £100k for about 5,000 participants – £ 20 per customer captured)

Daniel Heaf talked a little more about the BBC Radio 1 event, big learning was that it is a global event that runs 24 x 7 and this has to be planned for, as do the details like “virtual bouncers” if you want to have a 2nd Life event of the same quality as a real life event – and you also need to think about what to do with your 2nd Life building once the show is over.

I also caught up with Adam Reuter (Real Life name Adam Pasick) again to get his take on 2nd Life over the last 3 months since we last met. I think he made a good point which is that the world is so vast (apparently you cannot now visit it all in one lifetime) so one could avoid all the commercial hoopla very easily if one wanted to.

In the Q&A sessions there was quite a lot of testing of the numbers – how many people as opposed to Avatars, how many were live and not dormant, how long anyone stayed etc etc – no real conclusions but I suspect the real active user base is quite a bit smaller than the topline numbers. I asked about interim approaches, i.e. something between a Second Life and a Habbo in complexity. That brought the discussion on to the Role Playing “Sword and Sorcery” worlds such as World of Warcraft and RuneScape, which overall still have many more users than either Second Life or Habbo Hotel. I picked up this discussion later with Roo Reynolds, and I have blogged a bit more about my further thoughts on the next evolution of virtual worlds over at our blog at broadstuff.